While insurance, aka protecting the stuff you love, hasn’t always been seen as exciting, times might be changing, as the sector increasingly moves towards protection, mitigation and becoming service-led.
Someone who believes in this excitement is Dutch entrepreneur Dirk Huibers.
Spotr, the startup he cofounded in 2021, underwent several pivots before hitting on that realisation. Huibers’ first company, Octo, cofounded in 2015, used sensors to inspect the energy usage, occupancy and air quality of buildings. More recently, he cofounded a new company, Spotr, which is taking this a step further by using AI and image recognition to assess buildings anywhere in the world from their photos. It’s far more efficient than sending an underwriter to take a look (and more accurate when it comes to ongoing risk selection and pricing).
In contrast to the real estate companies Spotr is targeting, which might have tens of thousands of buildings in their portfolios, major insurers provide coverage to millions. “The problem of underinsurance is more urgent and volumes a lot bigger,” Huibers says.
Still, insurance companies aren’t the easiest to build products for. The mechanics of underwriting a policy can be complicated — and the large firms startups want to target can seem impenetrable.
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“What insurance companies like about us is that we’re not insurance natives, but tech experts,” says Huibers. “But we didn't know yet how our technology fit in the underwriting process.”
Off-the-shelf products exist, but they don’t solve problems. Going deep with users and understanding how they work is how you drive real change.
To learn more, Spotr applied to the Zurich Innovation Championship, an annual programme run by the insurance giant Zurich Insurance Group. Spotr wasn’t the only insurance newbie — according to Zurich’s programme directors, more than half of the startups that formed the 2023 cohort did not come from an insurtech background.
“By bringing together their respective strengths, incumbents and startups can together create solutions that figuratively turn insurmountable mountains into small hills,” says Joel Agard, group head of innovation at Zurich. “We’ve seen it time and time again how joint innovation provides the stepping stone to move mountains and this isn’t limited to what’s traditionally considered as ‘insurtech’.”
Huibers says Spotr received intensive coaching during the four-month accelerator, meeting with Zurich team members three times a week to ensure the product was suitable for the organisation. Since Zurich launched the Innovation Championship in 2018, more than 50 startups have started ongoing collaborations (out of 8k applicants across four editions), including global winners which enter a four-month accelerator programme and have the opportunity to receive grant money after completing a certain amount of work.
“It’s much more than just an accelerator,” says Antony Elliott, group head of digital R&D at Zurich. “What sets Zurich’s programme apart is the matchmaking approach we take, where we match passionate teams close to the customer in the country, to a startup with innovative technology and our global insurance expertise.
“Collaborating together, we prove and refine the solution in that first country and then look to scale the benefits across the group.”
For example, Hence Technologies, another Zurich Innovation Championship 2023 winner, worked closely with Zurich’s Canadian office to figure out how to scale its tech in an insurance setting.
The startup uses AI to match internal and external lawyers to claims — perfect for insurance firms dealing with huge volumes of claims. Rather than a single claim handler using only past experience to select the right lawyer, it can instead use data and AI to surface recommendations.
Zurich’s Canada office alone has more than 3,000 lawyers on file. According to Hence, its software has had an estimated impact to Zurich of 2-4% savings on the cost of claims — and with the Zurich Innovation Championship, the startup got two years of onboarding done in two months.
“The Zurich Innovation Championship was appealing because it meant we could collaborate to build something that would be really transformative,” says Arun Shanmuganathan, Hence’s cofounder. “Off-the-shelf products exist, but they don’t solve problems. Going deep with users and understanding how they work is how you drive real change.”
AI is everything
While startup funding across the board pulled back in early 2023, investment returned to the insurtech sector in the second half of the year. In Q3, European insurtech deal activity was up 23% compared to the previous quarter, with 21 deals.
AI is perfect [for insurance] because it’s data heavy, and it’s a service industry where customer satisfaction is very important.
Those deals showed that in a world where AI is coming for everything, insurtech is no different. UK insurtech Tractable’s $65m raise — by far the space’s largest in 2023 — underlined this. The startup uses AI to visually assess cars and homes.
AI is now “tablestakes” for new insurance products, according to Elliott. “It’s more surprising if a [startup] isn’t using AI,” he says, adding that of the 12 Zurich Innovation Championship winners in 2023, 11 were working on AI-powered products.
“AI will change everything,” Agard agrees. “AI is perfect [for insurance] because it’s data heavy, and it’s a service industry where customer satisfaction is very important. AI has the chance to transform the entire customer journey.”
According to Ernst and Young, 67% of European insurance firms are already investing in AI, with 76% planning to up their spend in this area in 2024.
Now there are more processes and robust elements we have to work towards. We have the support of Zurich to do that.
But in the insurance space, legacy providers are naturally cautious when it comes to implementing new technologies, weighing up the risks and rewards of any given solution.
Agard says that, for this reason, it’s important for companies to find the right companies to work with.
He adds that Zurich finds the right match by prioritising working with startups that are chasing realistic goals and sustainable expansion over growth-at-all-costs unicorns. Inspired by the concept of startup ‘zebras’ — a term coined by US group Zebra Unite which refers to companies that focus on growing profitable, sustainable businesses — Zurich even uses a zebra as the mascot of its Innovation Championship.
“We’ve been able to do a lot of testing and get a lot of feedback through the Zurich Innovation Championship,” says Shanmuganathan. “Now there are more processes and robust elements we have to work towards. We have the support of Zurich to do that.”
The Zurich Innovation Championship 2024 kicked off in early January 2024. Submissions are open till February 14. For more information and to sign up, visit here.